Andrew McDermott

According to a recent
McKinsey study, 98 percent of all large construction projects experience a
cost overrun of 30 percent; 77 percent of these projects are 40 percent late.

It gets worse.

These projects take 20 percent longer to finish and are 80
percent over budget. Completing projects on-time and in-budget are
increasingly difficult for construction firms. For most firms, cost overruns
aren’t the exception; they’re the rule, a worldwide problem for
contractors.

But it doesn’t have to be.

What contractors need to 2x
their revenue

You can’t fix your cost overruns if you’re not sure what’s
causing it. Research by Edyta Plebankiewicz at the Institute of Construction
Management lists the following causes of cost overruns.

Psychological causes refer to optimism
bias in decision-makers and cognitive biases in construction and client teams.

Political causes point to deliberate
cost underestimation (low bids combined with contractor clawbacks) and forecast
manipulation

Here’s a summary of the items included in her research.

If you’d like to increase your revenue, it’s essential to
gain a clear understanding of the causes that routinely bleed your budgets dry.
This is where time tracking makes a significant difference in your construction
projects. The impact is significant whether you pay your team by the job or the
hour.

Here’s how time tracking helps you with each of these
categories.

Technical
causes: Minute-by-minute time tracking exposes technical weaknesses and
obstacles. Are hourly crews making too many trips to the store for supplies?
Are they offering customers extras or favors (e.g., out of scope repairs or
additions) because they’re already on-site? Time tracking provides you with the
data you need to dig deeper.

Economic
issues: Do your employees have the financial motivators they need to
perform at an efficient or high level? Using time tracking as a confirmation
tool, you can experiment with incentives and rewards (i.e., completion bonuses)
to see how employees perform.

Contractual
causes: This could provide you with the data you need to renegotiate the
terms of your agreement with customers. If you’re getting an unfair deal,
aggregate time tracking data could provide you with the edge needed in
negotiations with both current and future clients.

Psychological
causes: Time tracking can expose unfounded optimism and cognitive biases in
customers/decision-makers. By using time tracking data, your proposal/bid can
include checks and balances to prevent unfounded optimism. A word of caution,
though. Aggregate time tracking data should be used with care. It’s essential
to provide customers with high-level data in a way that minimizes harm to your
company (e.g., 55 new construction projects over the last eight years have
shown us that it takes X amount of weeks to complete Y).

Political
causes: You can use aggregate time tracking data to disqualify low ball
competitors, getting customers to second-guess their bait and switch tactics. Many
customers want a low ball bid; time tracking data will provide you with the
bargaining power you need to command higher fees (all things being equal). Bonus
points if your customers receive supporting data (e.g., photos, videos, plans,
etc.) to validate your proposal/bid.

A simple detail like precise, as-it-happens, time tracking
is an extraordinary tool in the right hands.

How can contractors use time
tracking to 2x their revenue?

Here are several strategies construction companies can use
to 2x their revenue. Use your time tracking data to control the following areas
of your business.

Costs. Vetting
your team provides you with the assurances you need to qualify your project
teams. However, time tracking is one of the tools you can use to verify that
costs are in line with expectations. With adequate time tracking, you can
identify whether employees are productive and consistent.

Payables. Time tracking, when combined with accounting data, gives you a clear idea of
the amount you’re paying out to material suppliers, subcontractors, and
laborers.

Billable
Leakage. A Trimble report discovered that construction
workers lose 45 to 90 minutes per day searching for the equipment, tools,
and data they need to work. These billable leaks increase project costs
unnecessarily over time, impacting your firm’s cash position. Inaccurate time
tracking, poor estimates, and unnecessary rework also contribute to billable
leakage.

Cash
position. If your team is paid hourly, time tracking should provide you with
an estimate on the amount of cash on hand you have at any given time—income and
assets minus assets and liabilities, typically outlined in a single account.
Delayed or withheld payments and unpaid bills impact your firm’s cash position.

How do you use your time tracking data to 2x your revenue?

Collect 30 – 90 days of accurate time
tracking data. You’re looking to collect data routinely so you can
forecast, predict, and assess your team’s performance.

Look at your time tracking data. Find
and make one improvement based on the data you’ve accumulated, e.g., eliminate
downtime due to lost equipment, then reduce or eliminate rework, and so on.

Use time tracking data to eliminate waste
across your organization. Are crews standing around for large portions of
the day (skills waste)? Are they waiting for the data equipment or instructions
needed to work? Use your timesheets to eliminate transportation, inventory,
motion, waiting, overproduction, over-processing, defects, and skills waste.

If you’re attracting a regular stream of clients, you’ll
make a surprising discovery. The amount of revenue you generate per project
will begin to go up. You’ll find you’re making huge gains in productivity and
profits while your costs go down.

It’s a repeatable series of steps you can follow.

This is what you need to 2x
your revenue

It’s an uncomplicated series of steps your construction team
can follow. As we’ve seen, the vast majority of projects take 20 percent longer
to finish and are 80 percent over budget. Ninety-eight percent of all large
construction projects experience a cost overrun of 30 percent; 77 percent of
these projects are 40 percent late. It’s a worldwide problem for construction
crews.

How are two percenters able to avoid this problem?

These high-performance crews use their data, time tracking,
to understand and improve their team’s performance. You can do it too. With
step-by-step improvement, you’ll find the day-to-day struggle becomes optional
in time.

If you want to take on big clients, you need to be able to produce your billing in LEDES format. The Legal Electronic Data Exchange Standard (abbreviated as LEDES and pronounced as “leeds”) format for billing helps corporate clients clearly see what their lawyer is billing them for. Billing departments of medium-to-large corporations require lawyers to bill with LEDES.

LEDES uses a specific configuration of data so clients can universally audit the billing data and make sure they’re only paying for what they need. The concept is simple, but the formatting itself can be intimidating — especially if you’re stuck doing it manually.

The Basics: What Is LEDES?

LEDES is a standardized system for the legal industry that helps firms categorize the tasks, expenses, or activities performed by their staff. LEDES helps law firms:

With LEDES, the original goal was clarity. Standardizing billing with LEDES makes payment and processing easier and more efficient. Both your firm and clients will benefit from adopting this process.

Why Your Law Firm Needs LEDES

Corporate clients (mostly large insurance companies) were driving the adoption of LEDES. They wanted invoices that they could easily understand. The LEDES Oversight Committee (LOC) created five basic principles to guide the LEDES format:

Keep it simple.

Make it unambiguous.

Diverge from existing formats as little as necessary.

Ask only for information the law firm is typically able to provide from their financial system.

Meet the needs of corporations, law firms, and legal industry software vendors to the maximum extent possible consistent with the first four criteria.

How do these five core principles serve clients and law firms using LEDES? Benjamin Lieber, the Managing Partner at Potomac Law Group, describes the billing chaos he experienced before standardizing their process.

Lawyers would send me their time every month by email and would come in all different formats and all different conventions and levels of granularity. And even the units would vary somewhat. Some would use a tenth of an hour, or some would use quarter hours, some would use a third of an hour, it was a mess. I would take all that, put it into spreadsheets, and then put it into invoices. It worked okay for the first 10 or 12 clients, but we were growing so fast, at some point it was way too much. It didn’t make any sense.

Making the billing process universal with LEDES helps manage expectations and save time.

Which LEDES Formats Are the Most Commonly Used?

Corporate clients dictate which LEDES format they prefer. Although there are five LEDES formats currently in use, LEDES 1998B is the most commonly used. On the other hand, LEDES 2.1 is the most recent format. Below, we’ve provided sample data from the LEDES Oversight Committee to get you acquainted with LEDES.

LEDES 1998B Format

LEDES 1998B is currently the most-widely used ebilling standard in the legal industry in the US. LEDES 1998B is a pipe-delimited plain text file (i.e., this format uses the “|” character to separate fields of data instead of “,”). Most law firms use this format because it’s familiar and straightforward. The downside of this format is the fact that clients often require nonstandard customizations that violate the standards set, defeating the purpose of working with LEDES.

LEDES 2000 XML Format

The LEDES 2000 format is in XML; this version accommodates complex fee arrangements between corporations and law firms, enabling law firms to compensate for their client’s nonstandard customizations without breaking the standard LEDES format.

LEDES 2.0 Format

This new format changes how math is calculated on an invoice. It includes the ability to itemize complicated taxes, bill alternate fee arrangements, credits, and debits on a matter. It supports multiple vendor tax identification numbers, eliminates non-mainstream ebilling data elements, and creates consistency in the use of terminology, among other changes.

LEDES 2.1 Format

This updated format compensates for time, billing, and third-party ebilling systems using different math logic. XML Ebilling 2.1 reconsidered and published the underlying math statement with the hopes that this logic could be standardized by the multiple systems involved in legal ebilling.

As of January 2020, the documentation for this format has been updated.

Using the segments and fields listed in these sample files, you should be able to create an invoice that provides clients and firm stakeholders the data they need to process your invoices quickly and efficiently.

How Bill4Time Helps Bill in LEDES Format

If you’ve looked at the sample data above, you might have realized something important about LEDES. It can be complicated, messy, and challenging to work with — especially if you’re doing this manually for each of the invoices produced in your law firm.

If you’re new to LEDES, this may look tedious. And that’s why you should avoid doing LEDES manually. If you have ebilling and practice management software, it should provide you with the support you need to track and export invoices in the correct LEDES and UTBMS formats.

Here’s how Bill4Time helps you with the LEDES invoicing process.

We frontload the work so it’s easy to use and easy to maintain staff compliance. Once you’ve enabled LEDES in your system settings and have determined if your client requires ABA codes or not, you can turn it on for one of or all of your clients. There are LEDES-specific fields in Bill4Time that help you export the data into the LEDES format that’s right for you.

Do they have a project ID?

Do they require specific timekeeper IDs or classifications?

Does the client require ABA codes?

Do they have a matter case ID number?

Do they have timekeeper IDs or classifications?

Pulling data from your clients and matters, Bill4Time quickly exports the data into the LEDES format that’s right for you. If you create your LEDES file from an invoice and need to make changes to it, you can quickly enter the changes in Bill4Time and export again in one click. Instead of digging back through the pipes manually, you can make the changes within Bill4Time. You can read more detail on billing in LEDES from Bill4Time in our help center article called “What do I need to know when exporting to LEDES?”

The Bottom Line: Your Law Firm Needs LEDES to Grow

Billing in LEDES provides your firm with the standard naming conventions for timekeepers, tasks, and processes. As a naming convention, it gives you firm-wide naming conventions. More importantly, it provides stakeholders with the data they need to enforce these conventions.

Each line item on your invoice is a unit of revenue. Every improvement you make to the quality of your timesheets and invoices increases your acceptance and collection realization rates for your firm. It gives your firm the data needed to increase productivity, boost utilization rates, eliminate billable leakage, and more.

Most firms believe they make their money when they send out an invoice or bill for their time. The truth is, your firm makes money in pace with the timesheets they create. Billing in LEDES means you’re treating your timesheets like the precious cargo they are, one line item at a time.